If I Had a Billion Dollars

by Greg Walcher on February 10, 2017

If you had $1.2 billion to spend, what would you do with it? Before you answer, there are some strings attached. First, you are required to invest in electric vehicle technology, electric vehicle infrastructure, or something that would result in “zero emissions” vehicles. Now what would you do with all that cash? Answer: whatever the EPA dictates.

That is the crux of yet another EPA controversy. This week several free-market organizations (Competitive Enterprise Institute, Americans for Prosperity, Energy & Environment Legal Institute, FreedomWorks, National Center for Public Policy Research, and others) raised a fascinating legal issue about the settlement reached last fall between EPA and Volkswagen. A federal judge approved the deal in December, and one part of it is raising serious questions for the new Administration, according to a letter from the groups to President Trump.

The legal case stemmed from the automaker’s installation of “defeat devices” designed to cheat air quality rules in over 500,000 vehicles sold in the U.S. The consent decree provides relief for car owners, as well as penalties paid to the State of California and the Federal Trade Commission. But another part of the $15 billion agreement requires that VW invest $1.2 billion to foster electric vehicle infrastructure. What exactly does that mean? The decree does not specify where VW must spend it, but that it obtain EPA approval of the investment plan, and of spending plans every year. And EPA could levy massive fines should VW fail to comply every year. That EPA role in managing VW’s investment is now the issue.

You see, Congress has never given EPA authority or funding to oversee electric vehicle infrastructure development, much less to regulate the private investment of auto companies (foreign or otherwise). That was a major priority for President Obama, who promised in his 2011 State of the Union speech to put a million electric vehicles on the streets by 2015. Whether that is a similarly high priority for the new Administration ought to be for President Trump to decide. That’s why the groups signing this letter allege that the previous Administration used a legal settlement “to exercise the discretionary authority of future presidents.”

Legal settlements can help advance important policy goals. For example, when I was Executive Director of the Colorado Department of Natural Resources, we successfully negotiated the settlement of a case involving an accidental spill of beer into Clear Creek. Since many fish were poisoned, the state law required significant fines to be paid to the state wildlife agency. But paying lots of money to a state agency wouldn’t actually prevent future accidents, nor would it improve the environment. It’s just money changing hands. So instead, the brewery agreed to finance construction of a large system of manmade wetlands, which today treat effluent from both the brewery and the City of Golden, and which provide excellent educational opportunities for school classes learning the value of wetlands to water quality. That advanced the policy goals of our Administration, the city, and the brewery.

The difference with the EPA-VW settlement is that it advanced the policy goals of the outgoing Administration – in a way that could foreclose some options for the next. The groups writing to President Trump this week are asking two things. First, they want an analysis of how much this oversight activity will cost the EPA. Second, they want the EPA to “reassess its underlying commitment and authority” to oversee VW’s future investments. What that leads to is a call for the new Administration to exercise a “severance clause” in the settlement decree. That would allow the parties to remove that part of the deal without jeopardizing the consumer relief parts. But what will happen if the new Administration decides to do that?

Under the terms of the settlement decree, if the parties agree to cancel the EPA oversight portion, VW then has to pay the $1.2 billion to the U.S. Treasury. If you’re wondering what that has to do with the environment, or how it would improve auto compliance with clean air standards, I’m with you. Once again (to repeat a common theme), that is about money, not the environment.

I have no problem with fining companies that purposely and wantonly violate the law. In that respect, paying the fine to the Treasury might be better than giving EPA control over the company’s electric vehicle investment decisions. If this is only about enforcement, that works. But what an opportunity it might also be to create something with long-term benefits to the environment. As with the Colorado beer spill example, that might be the idea behind that aspect of the EPA settlement. But unlike the State example, this presumes power Congress never authorized, and more importantly, expertise the EPA does not have.

Here is the bottom line: if you had a billion dollars to help promote electric vehicle technology, what would you do with it? Most likely, you would invest in electric car companies, or those doing the best work in research and development. The last thing you would do is give it to the EPA, or pay it to the U.S. Treasury.

A version of this column originally appeared in the Grand Junction Daily Sentinel February 3, 2017.